No Deposit Home Loans

[KiahsMum]

Hi there :)

DH and I are currently looking at getting into the property market for our first home, bit worried if we don't look at it soon will miss our chance. We have some money saved but not enough for a full deposit, wondering what the deal is with No Deposit Loans are, what are the drawbacks?

Thanks in advance

:thumbsup:

[andie_pandie]

Hi there, thanks for your post.

No Deposit Home Loans are becoming very popular with the first home buyers market as it is now getting as you mentioned harder to get into the market.

With the No Deposit Loans, there are two options. The first option is to have a market interest rated product. You will have to pay mortgage insurance, bank fees, some government fees and solicitor. This could mean depending on the amount borrowed either a big chunk of your first home owners grant being used or more. In some cases it is good to have at least some extra savings to put towards some of the fees.

Another option is a No Deposit Home Loan where there is no mortgage insurance however the interest rate is higher, basically you pay the higher interest rate for at least 3yrs then have the option to drop down to a normal rate depending on the equity in your property at the time. You will still have bank fees, solicitor and some government fees, however your grant may be surfice to cover most of these costs.

Drawbacks on a No Deposit Home Loan, are basically you do not have much equity in the short term however you may choose depending on the home loan product you have to pay extra into the loan to reduce it down to gain equity, or rely on natural progression in value depending of course on the home loan market at the time.

A question I am asked a lot is once people have a home loan is how quickly before they can start consolidating some debts into their home loan. Basically as per the drawback above, if you don't at least have 10-15% including the debt equity in the property most banks won't do the consolidation, hence again try to get as much money into the home as you can.

I hope this has answered your question and if you need further assistance your are more than welcome to PM me.

Regards Andrea